Reilly to seek 18 percent cut in car insurance

September 29, 2005



BOSTON --Attorney General Thomas Reilly says he will ask for an 18 percent reduction in the state's auto insurance rates for next year, which, if approved, would trim nearly $200 off the average statewide premium.



Just a month ago, Reilly said publicly he would seek a 10 percent rate reduction, but indicated that circumstances have changed.



Industry data from 2004 shows that auto insurers are paying out less in claims because of fewer accidents and lower repair costs and the industry's estimate of future income is too conservative, he said.



"Families are being absolutely crushed by the cost of operating their cars right now, from the skyrocketing price of gas to the high cost of auto insurance," Reilly said in a statement released Wednesday. "We've done our work, and the numbers are clear."



The Automobile Insurers Bureau of Massachusetts is seeking a 0.1 percent rate cut next year, marking the first time the industry has asked for a decrease.



"Any decrease of that magnitude would stagger the entire insurance industry here," said Daniel Johnston, president of the organization that represents the state's auto insurers, in response to Reilly's latest proposal.



But Johnston would not comment further because he had not seen the attorney general's proposal.



Both the industry's recommendations and Reilly's proposal will go to Insurance Commissioner Julianne Bowler, who will set the final 2006 rate in December. The decision can be challenged in court.



Bowler has lamented the politicization of the process that tends to lead to rates that are too low.



"The political fiasco that is the rate-setting process in Massachusetts -- the passion play that we have -- makes it nearly impossible to move anywhere but the low point," she said earlier this week.



Massachusetts in the only state where auto insurance rates are set by state regulators. The process begins with the industry's recommendation, followed by the attorney general, who is charged with representing the interests of drivers.



Auto insurance is quickly becoming an issue in the governor's race. Reilly, a Democrat, has announced he will challenge Republican Gov. Mitt Romney.



Romney has made his own proposed changes in the auto insurance system to foster competition, including deregulating the industry to let companies set their own rates. Romney filed a bill in June that he said would reward better drivers with lower rates.



Glenn Kaplan, head of the attorney general's insurance division, said he would file Reilly's rate request on Thursday.



While the industry said recent downturns in claims is an aberration, Kaplan said the attorney general thinks aging baby boomers tend to get involved in fewer accidents, and those that do occur are less severe because of advances in automotive safety technology. More aggressive anti-fraud efforts are also reducing claims losses, he said.